TMI Blog2020 (8) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts in the present case clearly show that the assessee company has acquired the assets under a business transfer agreement. Hence it has succeeded the transferee company. The provisions of section 170 are clearly applicable on the facts of the present case. The submission of the assessee that there are separate provisions for dealing with slump sale is not sustainable with regard to the depreciation on assets obtained under slump sale. As we have already noted above the concerned sections that is section 2(42)c and section 50B referred by the learned counsel of the assessee do not deal with the issue of depreciation on assets acquired under slump sale. As submitted by learned Counsel of the assessee the Assessing Officer has accepted the value of goodwill attributed by the assessee as a balancing figure in the value of sump sale and value attributed to specific asset taken over. 5th proviso to section 32 is evidently applicable for the computation of depreciation on assets which have been taken over from the transferor company. Hence the computation of depreciation on assets which have been taken over has to be in accordance with the said proviso. Hence the computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and which direction are kindly prayed to be reversed. Ground No. 2 - Actual cost of (i) Motor Vehicle and (ii) Furniture and Fixture acquired under Slump Purchase directed to be adopted at Written Down Value ('WDV') of the Seller instead of their fair value of acquisition by the Appellant (Purchaser) as per Valuation Report 2.1 On the facts and circumstances of the case and in law, the CIT(A) erred in directing the AO to adopt the acquisition cost of Motor Vehicle and Furniture and Fixture as per corresponding WDV of the Seller instead of their fair value as per the Valuation Report thereby resulting in reduction of tax depreciation claimed and which directions are completely erroneous, unwarranted and prayed to be reversed. 3. The grounds of appeal raised in revenues appeal read as under :- 1. Whether on the facts and circumstances of the case, the Ld.CIT(A) was justified in holding that the provisions of section 170 are not applicable in the present case ? 2. Whether on the facts and circumstances of the case, the Ld.CIT(A) was justified in holding that the assessee is eligible for depreciation on the fair market value of assets received pursuant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable. In the course of the assessment proceedings, the AO called upon the appellant to show-cause why the fifth proviso to section 32(1) of the Act should not be applied in its case. In response the assessee submitted that it is not a case of succession within the meaning of section 170(1) of the Act. The AR of the assessee, therefore, contended that the fifth proviso to section 32(1) does not come into play. The AO rejected the assessee s contention and applied the fifth proviso to section 32(1) of the Act. This resulted in disallowance of ₹ 17,12,88,410/-. 6. In arriving at the aforesaid disallowance of depreciation the assessing officer called for information from the transferor-company of the WDV of assets transferred in its books. From the said information of the assessing officer noted the following :- Sr. No. Block of Asset Rate of Depreciation % WDV as on 31.3.2013 of block of asset Transferred 1. Furniture Fixture 10% 55,60,753 2. Office Equipment 15% Nil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on the business and not of the business itself. Thus, in order for succession to take place, identity of the person shall be subsumed by that of the successor, without disturbing the continuity and integrity of the business; that is, the successor should cease to exist as legal entity in the eyes of law. 9. Learned CIT(A) termed the same as decision of the ITAT. However he further observed that the cost of the assets belonging to each of the blocks are to be treated taken as the FMV. He however found that the value of the following assets as per the valuation report was less than the corresponding closing WDV in the books of the transferor at the time of transfer: (i) motor vehicle and (ii) furniture and fixture He noted that the basis for valueing these assets below the WDV could not be explained by the appellant. Therefore, he directed the AO to take the value of WDV of (i) motor vehicles (ii) furniture fixtures as per corresponding the WDV in books of the seller at the time of sale. He held that the value of goodwill, which is the balancing figure, .will be reduced accordingly. 10. As regards ground No. 2 he held as under :- In the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income tax act. 14. Learned counsel further submitted that even if WDV of the transferor is adopted the balancing figure of goodwill adopted by the assessee on which tax depreciation has been allowed by the assessing officer will increase from ₹ 61,34,59,000/- to ₹ 1,30,69,08,315/- increased by the value of CDN of ₹ 54,12,20,000/-. Learned counsel further relied upon several case laws in support of his proposition 15. Per contra learned Departmental Representative relied upon the orders of the authorities below. In support thereof learned DR also relied upon several case laws. 16. Upon careful consideration we note that in the present case assessee has acquired the assets under a slump sale. The income tax act under section 2(42)(C) defines slump sale as under: slump sale means the transfer of one or more undertakings as a result of the sale for a lump-sum consideration without value being assigned to the individual assets and liabilities in such sales. From the above it is clear that slump sale is a specie of transfer by way of sale. The provision of section 50B reads as under :- 50B. (1) Any profits or gains arising from the slump sale effecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... makes it clear that the above section deals with the mode of charging to tax, the profit or the gain arising out of the slump sale. It nowhere deals with the issue of depreciation on the assets acquired under slump sale. When there is no mention whatsoever about the issue of depreciation on assets acquired under slump sale under section 5OB the natural, corollary is that the depreciation on assets acquired under slump sale is to be governed by the general provisions given in the income tax act for the depreciation on assets. In this regard we may refer to the 5th proviso to section 32(1). The said proviso is as under :- Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in clause ( xiii ), clause ( xiiib ) and clause ( xiv ) of section 47 or section 170 or to the amalgamating company and the amalgamated company in the case of amalgamation, or to the demerg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany has acquired the assets under a business transfer agreement. Hence it has succeeded the transferee company. The provisions of section 170 are clearly applicable on the facts of the present case. 21. The submission of the learned counsel of the assessee that there are separate provisions for dealing with slump sale is not sustainable with regard to the depreciation on assets obtained under slump sale. As we have already noted above the concerned sections that is section 2(42)c and section 50B referred by the learned counsel of the assessee do not deal with the issue of depreciation on assets acquired under slump sale. As submitted by learned Counsel of the assessee the Assessing Officer has accepted the value of goodwill attributed by the assessee as a balancing figure in the value of sump sale and value attributed to specific asset taken over. 22. The distinction between the case of the assessee and succession envisaged u/s. 170 as submitted by learned Counsel of the assessee also fails on the touchstone of Hon'ble Supreme Court decision in the case of CIT Vs. K.H. Chambers [1965] 55 ITR 674 . In this view of the matter other decisions referred by learned Counsel of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation on assets which have been taken over from the transferor company. Hence the computation of depreciation on assets which have been taken over has to be in accordance with the said proviso. Hence the computation of depreciation on these assets transferred in terms of the said proviso by the assessing officer is correct. 26. Now we deal with the issue of value of treatment of difference between the WDV of assets taken over and the slump sale amount. Honourable Supreme Court in the case of Arevat T D India Ltd. (supra) has confirmed the order of honourable Delhi High Court. The Hon ble High Court held that excess amount paid over and above the tangible assets for acquisition of various business and commercial rights under slump sale can be categorised under the head goodwill. This view also supported by Hon'ble Delhi High Court decision in the case of Triune Energy Services Pvt. Ltd. Vs. DCIT (65 taxmann.com 288). The Tribunal in that case has set aside the issue of valuation of goodwill to the file of the Assessing Officer. The Hon'ble High Court held that the same being a balancing figure the value of goodwill was to be allowed. Hence the direction to treat the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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